Planning for Retirement soon?
Written and accurate as at: Nov 13, 2023 Current Stats & Facts
Planning for retirement soon?
Are you planning on retiring in the next couple of years? If so, you should consider some pre-retirement planning right now.
There are several things to consider. How much income do you want to have for the active, less active and sedentary phases of your retirement to do everything you want to do? Do you have enough in the pot to fund this desired retirement income? Will you get Age Pension support at any point? Do you have to shuffle money around between outside and inside super or between husband and wife? What if the share market and property prices crash? One of the biggest things to learn more about is how to protect yourself against the inevitable market crashes. Based on history they will happen twice in a 20-year retirement, and that is the focus of this article.
Currently you’re a worker who is building their super and wealth and investing through contributions, so you are a regular BUYER of investments. When you retire and start drawing down on your super and investments to provide a passive income, you swap, and become a regular SELLER of investments to fund those monthly super pension payments. This is a complete 180 degree about face, and it has some ramifications that you should start planning for now.
If you think back to the big investment crashes in the last 20 years, we had the Covid crash in 2020 where all markets fell 30% and took 12 months to recover, the Global Financial Crisis in 2007 where all markets fell 50% and took 5 years to recover and the tech wreck in 2000 where overseas markets fell 50% and took 6 years to recover. The key is that in all those crashes when the good quality, blue chip investments underlying your super fell in value, you were buying them, as your employer and maybe you made your regular super contributions. As an example, in the GFC, Commonwealth Bank shares fell from $60 per share in 2007 back to $24 per share in 2009. Luckily you bought some with your regular contributions as they’re now around $100 per share and you’ve also earned good dividends every year. Different story if you had been forced to sell some at the wrong time because you were retired and had to provide cash within your super pension to draw down a regular monthly payment to live.
There are strategies to protect against having to sell undervalued assets to fund pension payments in retirement. At Eclipse, we’ve been in this game for over 30 years and have been using our ‘Bucket Strategy’ to protect our retired clients through all these crashes.
The biggest take away from this article is if you are looking to retire in the next few years, you should pre-plan for it now. The world is a very uncertain place right now with wars, higher inflation, and interest rates, and you don’t want a market crash to happen just before your retirement if you’re unprepared. Many people couldn’t retire in 2007/8/9 in their 60’s and retired in 2012/13/14 in their 70’s because they hadn’t come in for pre-retirement planning and got caught by the 2007 GFC. Don’t miss 5 years of the best, active years of your retirement, plan and protect yourself now.
For a free consultation with local people who understand the complexities of these or any other financial matter, contact Eclipse Financial Services at Cannonvale on 49467359 today or visit www.eclipsefp.com.au
Book in for our free Pre-Retirement Planning seminar in December.
